Compound Trader – Scam or Not

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Compound Trader – Scam or Not?

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Much of the binary options market operates through Internet-based trading platforms that are not necessarily complying with applicable U.S. regulatory requirements and may be engaging in illegal activity. Investors should be aware of fraudulent promotion schemes involving binary options and binary options trading platforms.

What is a Binary Option?

A binary option is a type of options contract in which the payout depends entirely on the outcome of a yes/no proposition and typically relates to whether the price of a particular asset will rise above or fall below a specified amount. Once the option is acquired, there is no further decision for the holder to make regarding the exercise of the binary option because binary options exercise automatically. Unlike other types of options, a binary option does not give the holder the right to buy or sell the specified asset. When the binary option expires, the option holder receives either a pre-determined amount of cash or nothing at all.

Investor Complaints Relating To Fraudulent Binary Options Trading Platforms

The SEC has received numerous complaints of fraud associated with websites that offer an opportunity to buy or trade binary options through Internet-based trading platforms. The complaints fall into at least three categories:

  1. Refusal to credit customer accounts or reimburse funds to customers

These complaints typically involve customers who have deposited money into their binary options trading account and who are then encouraged by “brokers” over the telephone to deposit additional funds into the customer account. When customers later attempt to withdraw their original deposit or the return they have been promised, the trading platforms allegedly cancel customers’ withdrawal requests, refuse to credit their accounts, or ignore their telephone calls and emails.

  1. Identity theft

These complaints allege that certain Internet-based binary options trading platforms may be collecting customer information (including copies of customers’ credit cards, passports, and driver’s licenses) for unspecified uses. Do not provide personal data.

  1. Manipulation of software to generate losing trades

These complaints allege that the Internet-based binary options trading platforms manipulate the trading software to distort binary options prices and payouts. For example, when a customer’s trade is “winning,” the countdown to expiration is extended arbitrarily until the trade becomes a loss.

Beware of Overstated Investment Returns for Binary Options

Additionally, some binary options Internet-based trading platforms may overstate the average return on investment by advertising a higher average return on investment than a customer should expect, given the payout structure.

For example, a customer may be asked to pay $50 for a binary option contract that promises a 50% return if the stock price of XYZ company is above $5 per share when the option expires. Assuming a 50/50 chance of winning, the payout structure has been designed in such a way that the expected return on investment is actually negative, resulting in a net loss to the customer. This is because the consequence if the option expires out of the money (approximately a 100% loss) significantly outweighs the payout if the option expires in the money (approximately a 50% gain). In this example, an investor could expect — on average — to lose money.

Always Check the Background of a Firm or Financial Professional

Before investing, check out the background, including registration or license status, of any firm or financial professional you are considering dealing with through the SEC’s Investment Adviser Public Disclosure (IAPD) database, available on Investor.gov, and the National Futures Association Background Affiliation Status Information Center’s BASIC Search. If you cannot verify that they are registered, don’t trade with them, don’t give them any money, and don’t share your personal information with them.

Additional Information

The Office of Investor Education and Advocacy has provided this information as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.

Turning $100 Into $10,000 in the Forex Market in a Year

Achieving a return of this scale is pretty much impossible

MCCAIG / Getty Images

If you’re a new entrant to the foreign exchange (forex) trading world, you have probably been bombarded with advice from various sources that promise to help you build your assets at a rapid pace. One of the more lofty pitches out there suggests that novice forex traders can start with $100 and see that money grow to as much as $10,000 within one year.

That amazing claim raises the questions of whether or not such a huge return is possible even with aggressive strategies and whether novice traders stand a chance of this kind of return, versus the more likely outcome of losing all of their trading capital.

Possibility Vs. Probability

Theoretical patterns of gain or loss do not always translate into probable outcomes in the forex market. If you work a little math using a return on investment (ROI) calculator, it can help you put into perspective what would be necessary to turn $100 in assets into $10,000 within one year. Your annual rate of return on your initial investment would need to be a staggering 9,900% to achieve such a return.

Breaking this down another way, you can use the compound interest calculator provided by the Securities and Exchange Commission (SEC) on its Investor.gov website to determine how much your daily rate of return would have to be to have a $9,900 gain at the end of one year.

The compound interest calculator (which in this case is used as a profit-compounding calculator) shows that if you entered and closed out one trade every day of the year, the average profit on each trade would have to be at least 464%. In other words, you would have to more than quadruple your money every day to come even close to $10,000 at the end of a year.

Trading Consistency and Win Rate

While you might find that you can make large profits from some trades that hit the market just right, it’s the requirement for consistently profitable trades, day after day, that creates the most difficulty. Some sources say that even expert traders have a trading win rate, or percentage of successful trades, of anywhere from 55% to 70%. A novice trader would almost certainly have a lower win rate, along with facing the difficulty of finding enough profitable trades to enter into consistently each day over the span of an entire year.

A High-Level Perspective

There may be a few traders who believe they can achieve such returns on a consistent basis, but looking at the volume of easily accessible assets that exist in the entire world puts the matter in perspective. A November 2020 MarketWatch article estimated this figure to be about $90.4 trillion. Now assume that instead of $100, a few large investment banks make trades with the same 464% daily profits, reinvested daily.

For argument’s sake, assume the initial trade commitments of 10 large investment banks each totals $80 million. These are serious investments, but keep in mind that the daily trading volume on the forex can range from $2 trillion to as high as $5 trillion during periods of high volatility. The 10 big banks’ large investments might account for only about 0.02%-0.04% of daily forex trading volume depending on the level of activity.

If these big banks had the same 464 percent daily return needed to produce a $9,900 profit on an initial investment of $100, how much money would they have at the end of one year? According to the calculator, about $80 trillion, an amount that almost equates to all the money in the world.

Grounding Your Prospects

You might be a fan of the statement “Never say never.” It may also initially seem plausible to assume a trader could turn $100 into $10,000 within one year, but breaking down the math on return rates shows how unlikely this really is. While it may sound theoretically possible, in reality, it’s not a credible expectation when put into real-world practice.

The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.

How to Spot a Forex Scam

The spot forex market trades over $5 trillion a day, including currency options and futures contracts. With this enormous amount of money floating around in an unregulated spot market that trades instantly, over the counter, with no accountability, forex scams offer unscrupulous operators the lure of earning fortunes in limited amounts of time. While many once-popular scams have ceased—thanks to serious enforcement actions by the Commodity Futures Trading Commission (CFTC) and the 1982 formation of the self-regulatory National Futures Association (NFA)—some old scams linger, and new ones keep popping up.

Back in the Day: The Point-Spread Scam

An old point-spread forex scam was based on computer manipulation of bid-ask spreads. The point spread between the bid and ask basically reflects the commission of a back-and-forth transaction processed through a broker. These spreads typically differ between currency pairs. The scam occurs when those point spreads differ widely among brokers.

Key Takeaways

  • Many scams in the forex market are no longer as pervasive due to tighter regulations, but some problems still exist.
  • One shady practice is when forex brokers offer wide bid-ask spreads on certain currency pairs, making it more difficult to earn profits on trades.
  • Be careful of any offshore, unregulated broker.
  • Individuals and companies that market systems—like signal sellers or robot trading—sometimes sell products that are not tested and do not yield profitable results.
  • If the forex broker is commingling funds or limiting customer withdrawals, it could be an indicator that something fishy is going on.

For instance, some brokers do not offer the normal two-point to three-point spread in the EUR/USD but spreads of seven pips or more. (A pip is the smallest price move that a given exchange rate makes based on market convention. Since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point.) Factor in four or more additional pips on every trade, and any potential gains resulting from a good trade can be eaten away by commissions, depending on how the forex broker structures their fees for trading.

This scam has quieted down over the last 10 years, but be careful of any offshore retail brokers that are not regulated by the CFTC, NFA, or their nation of origin. These tendencies still exist, and it’s quite easy for firms to pack up and disappear with the money when confronted with actions. Many saw a jail cell for these computer manipulations. But the majority of violators have historically been United States-based companies, not the offshore ones.

The Signal-Seller Scam

A popular modern-day scam is the signal seller. Signal sellers are retail firms, pooled asset managers, managed account companies, or individual traders that offer a system—for a daily, weekly, or monthly fee—that claims to identify favorable times to buy or sell a currency pair based on professional recommendations that will make anyone wealthy. They tout their long experience and trading abilities, plus testimonials from people who vouch for how great a trader and friend the person is, and the vast wealth that this person has earned for them. All the unsuspecting trader has to do is hand over X amount of dollars for the privilege of trade recommendations.

Many of signal-seller scammers simply collect money from a certain number of traders and disappear. Some will recommend a good trade now and then, to allow the signal money to perpetuate. This new scam is slowly becoming a wider problem. Although there are signal sellers who are honest and perform trade functions as intended, it pays to be skeptical.

“Robot” Scamming in Today’s Market

A persistent scam, old and new, presents itself in some types of forex-developed trading systems. These scammers tout their system’s ability to generate automatic trades that, even while you sleep, earn vast wealth. Today, the new terminology is “robot” because the process is fully automated with computers. Either way, many of these systems have never been submitted for formal review or tested by an independent source.

Examination of a forex robot must include the testing of a trading system’s parameters and optimization codes. If the parameters and optimization codes are invalid, the system will generate random buy and sell signals. This will cause unsuspecting traders to do nothing more than gamble. Although tested systems exist on the market, potential forex traders should do some research before putting money into one of these approaches.

Other Factors to Consider

Traditionally, many trading systems have been quite costly, up to $5,000 or more. This can be viewed as a scam in itself. No trader should pay more than a few hundred dollars for a proper system today. Be especially careful of system sellers who offer programs at exorbitant prices justified by a guarantee of phenomenal results. Instead, look for legitimate sellers whose systems have been properly tested to potentially earn income.

Another persistent problem is the commingling of funds. Without a record of segregated accounts, individuals cannot track the exact performance of their investments. This makes it easier for retail firms to use an investor’s money to pay exorbitant salaries; buy houses, cars, and planes or just disappear with the funds. Section 4D of the Commodity Futures Modernization Act of 2000 addressed the issue of fund segregation; what occurs in other nations is a separate issue.

An important factor to always consider when choosing a broker or a trading system is to be skeptical of promises or promotional material that guarantees a high level of performance.

Other scams and warning signs exist when brokers won’t allow the withdrawal of monies from investor accounts, or when problems exist within the trading platform. For example, can you enter or exit a trade during volatile market action after an economic announcement? If you can’t withdraw money, warning signs should flash. If the trading platform doesn’t operate to your liquidity expectations, warning signs should flash again.

The Bottom Line

Conduct due diligence on the forex broker you’re considering by going to the Background Affiliation Status Information Center (BASIC), created by the NFA. Many changes have driven out the crooks and the old scams and legitimized the system for the many good firms. However, always be wary of new forex scams; the temptation and allure of huge profits will always bring new and more sophisticated scammers to this market.

iMarketsLive MLM Review (2020): Scam, Wolf, or King of Wall Street?

Table of Contents

It’s All About The Benjamins

So you wanna get rich from Forex trading, huh?

I know the feeling.

But you might wanna think twice about joining iMarketsLive.

Like it or not, most MLMs like iMarketsLive are dressed up sales jobs.

Whether it’s selling “the dream” to your friends and family to convince ’em to sign up for your new Forex trading program…

Or just buying and selling currencies in the Forex market yourself.

Either way, you better enjoy hustlin’ and grindin’ if you’re gonna make it in this game.

Let me break it down for you:

iMarketsLive – short for International Markets Live – is a unique multi-level marketing company that’s all about Forex trading.

That’s short for foreign exchange trading, also known as currency trading.

It’s just like the stock market but instead of buying and selling shares of companies, you buy and sell currencies like the U.S. and Canadian dollar.

And unlike a regular 9-to-5 job, skilled currency traders can make (or lose) serious bank.

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In fact, the Forex market is the largest financial market on the planet — doing 5 TRILLION (with a “t”) a day in trade volume.

That’s over 200 times larger than the New York Stock Exchange!

Now you can see why there’s an absolute sh*tload of Benjamins to be made in Forex.

And iMarketsLive is doing exactly that:

By 2020, they were pulling in over $6 million per month.

They’ve also experienced a tremendous amount of growth and momentum in 2020 and 2020.

But there’s a fair amount of controversy surrounding this network marketing phenom.

If you’ve noticed that too, you’re probably interested in a lil’ more info about ’em, right?

You’ve come to the right place, brotato chip.

iMarketsLive Company Overview

First things first:

iMarketsLive is a Forex trading MLM that offers various trading educational products and services to a global audience.

They currently appear in over 120 countries and have training available in 8 major languages.

As you’d expect, their headquarters is located in the center of the financial universe:

New York City, New York.

They also have a staff of over 60 educators who have a single job: Teach peeps like you and me about the joys of Forex and cryptocurrency trading.

Oh, did I not mention they do cryptocurrency markets like Bitcoin as well?

The company’s vision, according to their website, is to “Educate, Enrich, and Empower One Million Students by 2020.”

Admittedly, also according to their website:

Trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing financial security or life style.

To be fair, that could be said about any investment opportunity (e.g. financial services from Primerica, binary options, etc), but Forex trading is notoriously difficult — I know from personal experience.

Risks aside for now, let’s talk about how iMarketsLive came into being in the first place.

When Was iMarketsLive Founded?

What’s the real story behind iMarketsLive?

Well, for starters:

International Markets Live, Inc. was founded back in 2020 by CEO Christopher Terry.

But you know what’s weird?

iMarketsLive’s corporate website is surprisingly thin when it comes to offering information.

Most companies, even most MLM companies, have at least a little history of the company along with a small biography of the founder/CEO.

iMarketsLive.com has no such information on their site and seems to prefer to remain as mysterious as possible.

But I did manage to find this page, which appears to be an older bio of the company’s founder Chris Terry.

Here’s an excerpt:

Mr. Christopher Terry began this journey in construction, both as a worker and eventually as an owner, for nearly 12 years. In 1995, he discovered commodities trading and began to immerse himself in the markets.

In just 3 years, he was confident enough to walk away from his Construction Business, which had generated sales in excess of $40 million that same year, in order to become a full time trader.

Over the years he applied and effectively utilized this winning strategy of gaining the necessary learning and experience through the proper Mentors and then imitating the strategies of successful people.

While doing so he realized the same process of following success step by step, could bring average people everywhere to the same level of success that he himself had achieved.

Mr. Terry began to realize that at this point in his life it was his calling to help change people’s lives on a massive Global scale through a marriage of Network Marketing with Professional Trading.

This is why, in August 2020, Mr. Terry made the decision it was time to act on this Philosophy, and International Markets Live, Inc. was born.

One thing that’s missing from that bio of Chris Terry is his long history with MLMs and network marketing.

Terry came up in Amway, and although by his own admission he didn’t actually make any money, he said it gave him a “mindset of wealth”.

In other words, he probably realized the folks who made the most money in an MLM were the ones at the top and who recruited the largest downlines.

This also might explain why Chris Terry was reportedly a big promoter of Zeek Rewards*, which got busted by the SEC in 2020 for being a ponzi scheme.

(*In this interview with Denise Martino, Terry refers to Denise as his “downline member” and she clearly appears to be in Zeek at the time.)

Despite these failed business attempts, Chris Terry persisted and while the idea of iMarketsLive was spawned in 2020, it officially launched in 2020.

The new Forex trading MLM grew quickly and by 2020, iMarketsLive reached 55,000 members.

Unfortunately, that same year brokers began locking the accounts of many iMarketsLive customers for using an unregulated “expert advisor”.

Here’s what happened:

iMarketsLive had a special little automated trading program called “FX Signals Live”.

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The program automatically mirrored the trades of Chris Terry himself, so members could essentially play the Forex market without actually understanding it.

However, one of the main reasons there are regulations in the investment world is to prevent exactly that.

And when legitimate brokers like FXCM decided they wouldn’t allow it anymore, FX Signals Live was discontinued in 2020.

As a replacement, iMarketsLive released their new online “Harmonic Scanner” designed to help follow market trends.

It’s a little technical but here’s a basic video that explains what it does:

It’s basically an online tool that scans the market in real-time and gives you alerts for different price patterns and trading opportunities.

But now you actually have to know what’s going on and make the trades yourself.

What Are iMarketsLive Products?

iMarketsLive sells you on the ability to become a successful currency trader.

Sure, you could try to learn it all by yourself.

After all, how hard could it be to click a few buttons and place a few trades?

Buy low, sell high.

Easy peasy, right?

Well, despite what you may have heard, day trading is MUCH harder than it sounds.

That’s why iMarketsLive offers a full suite of support and trading education.

Over 100 training videos and modules offer basic and advanced strategies on both Forex trading and cryptocurrency investing.

You can also access live trading rooms and watch experienced staff members place trades and talk about the secrets of their success (in 8 different languages).

Here’s a good overview video that explains the iMarketsLive opportunity:

Obviously that’s a company sponsored video, so take it with a grain of salt (don’t drink the Kool-Aid).

But I will say that iMarketsLive seems to provide a ton of help for their members, which is always a big plus.

Even CEO Chris Terry himself gets in on the action, holding Sunday night webinars that you can sit in on.

Additionally, iMarketsLive gives you access to their proprietary financial trading software.

As mentioned earlier, their Harmonic Scanner searches the market for harmonic patterns to exploit and profit from.

Their Web Analyzer does the same with cryptocurrency, for an additional fee.

And even though their trade-mirroring service is gone, iMarketsLive still provides other ways for you to copy what their experts are doing.

Swipe Trades will alert you to “Forex trade ideas” including risk management and expert guidance for an extra $17 per month.

Swipe Coin does the same but for Crypto trade ideas and info, for an extra $100 per month fee.

While that may seem pricey, keep in mind that it allows you to get solid trade ideas sent right to your phone without having to do any of the legwork.

Because let’s be honest: If you knew what you were doing when it comes to trading, you wouldn’t be paying this company $165 a month or more for the privilege.

Long story short: The more you pay iMarketsLive, the more training and tools you get.

Speaking of which, here are your membership options if you wanna join:

iMarketsLive Membership Options

*Mobile users: scroll left/right on table if last column is not fully visible

iMarketsLive Membership Options
DIGITAL CURRENCY MONTHLY HFFX MONTHLY PLATINUM PACKAGE ELITE PACKAGE
INITIAL PAYMENT INITIAL PAYMENT INITIAL PAYMENT INITIAL PAYMENT
$189.95 $189.95 $225.00 $325.00
MONTHLY PAYMENT MONTHLY PAYMENT MONTHLY PAYMENT MONTHLY PAYMENT
$179.95 $179.95 $164.95 $274.95
WHAT YOU GET WHAT YOU GET WHAT YOU GET WHAT YOU GET
DC Academy HFF Academy IML Forex and Crypto Academy’s IML Forex and Crypto Academy’s
DC Scanner HFF TV IML TV (All Sessions) IML TV (All Sessions)
SwipeCoin App PipTalk Harmonic Scanner Harmonic Scanner
IMLTV Sessions High Frequency Forex Swing Trades & Night Owl Sessions Swing Trades & Night Owl Sessions
Pip Talk (Basic) Pip Talk (Basic)
Swipe Trades
Web Analyzer
Bounce Back
Gold Cup
SwipeCoin
High Frequency Forex
PIVOTS
LEVELS

Hey, nobody said day trading was cheap.

To be fair, iMarketsLive does offer a 7 day, 100% money back guarantee to all of its subscribers.

If you’re dissatisfied with their service in any way, you can get a full refund of your membership fee within a week of signing up.

iMarketsLive gives their Customers a “2 & FREE” option as well — if you personally refer 2 people into buying a monthly membership, your membership is free.

So: If you can convince a couple people that Forex trading is awesome…

You don’t have to pay anything to get the iMarketsLive training and support.

Sounds good, but here’s something you should know from a guy who’s been in the trenches:

My Forex Trading Experience

The risk factor in Forex trading is something we shouldn’t just gloss over.

As mentioned in iMarketsLive’s disclaimer, you can easily lose all your invested money in addition to the monthly fees.

I should know — years ago, I was heavily into Forex trading and learned everything I could about it.

Technical analysis, risk management, chart indicators — you name it, I tried it.

And that’s not all:

I kept daily trading journals, learned how to read candlesticks, recognize trends, and was a particular fan of using 2ATR for a trailing stop loss.

Along the way, I traded almost every currency pair, chart timeframe, and read every trading strategy book I could find.

(Here’s my personal favorite, along with this one originally published in 1930.)

I should also mention that I paid a small fortune for different trading systems, tools, and “secret” strategies from so-called experts.

I’m FAR from the smartest guy in the room — but I’m not a complete Muppet either.

I wasn’t just gambling (only risked 2-3% max per trade) and I gave Forex trading everything I had for almost 3 years straight while I was still driving truck.

And even though I had periods of profitability, in the end I always lost money.

Not to mention I also got sick of the highs and lows of trading — feeling like a God one week, damn near suicidal the next.

Out of desperation, I finally resorted to following a mirror-trading service which ultimately blew up and reduced my trading account to almost nothing.

It was my own dumbass fault, but that’s when I decided to hang up my Forex trading gloves and look for something else.

Also contributing to that decision was realizing that after being on countless online trading forums — I wasn’t alone in my frustration and misery.

The only ones who seemed to be making any consistent money in Forex (besides the banks and hedge funds), were the guys selling me the tools and systems.

Just like during the gold rush back in the 1800’s, the real money wasn’t in digging for gold — it was selling the pickaxes and shovels to the desperate and hopeful.

Now obviously, there ARE successful Forex traders out there.

So just because this ex-truck driver with a GED couldn’t do it, doesn’t mean that you can’t make it work.

Like any other form of retail trading, some folks make money and some folks lose money.

All I’m saying is that Forex trading is hard as hell.

As a general rule, if you enter a gambling game against a lotta peeps who are more experienced and skilled than you are…

It’s a safe bet that the odds aren’t in your favor.

Don’t say I didn’t warn ya.

Pros: Why Join iMarketsLive?

Potential for serious income without recruitment.

Almost every MLM in existence requires you to recruit and grow a huge downline if you wanna make the big money.

The reason is simple:

Your time is limited and there’s only so many hours in a week that you can use to sell products to people you know.

Forex trading is different in the sense that you could gain (or lose) a lot of money all by yourself, without ever having to recruit anyone.

No pants required.

While most MLMs involve you dragging around a box of products to various houses, iMarketsLive is something you do from your desk or smartphone.

This is a very modern MLM and the entire thing (training + products + support) is all available online.

Never having to leave your house to run your business is a definite advantage.

For example, go try selling Amway products with no pants — I’m guessing it wouldn’t turn out so well.

Plenty of training materials.

Between all the videos, training modules, tutorials, and live help sessions, iMarketsLive probably offers more actual product support than most other MLMs.

If you’re willing to invest in your education and want a crash course in Forex trading, there’s a vast bucket of knowledge here waiting for you.

Cons: Is iMarketsLive a Scam?

First off: Solid trading advice don’t come cheap.

Around $200 up front plus $170 a month is what it’s gonna cost you for the most basic level of membership.

That’s over $2000 per year.

But if that trading advice makes you ten times that, it might be worth it.

You could lose a lot more than your monthly fees.

Yes, plenty of people lose money in MLMs (most do).

But they generally lose money from not being able to recoup their minimum purchase requirements and monthly fees.

With iMarketsLive, in addition to your membership fees, you’ll also have to risk your own trading capital to play the currency markets.

And you might lose all of that money too.

In fact, thanks to the way that leveraged trades work, you can actually lose even MORE than the full amount of your Forex trading account.

A strong fishy odor.

Can you trust iMarketsLive?

Well, sometimes the best way to predict the future is to look at the past (or just Google the present):

• iMarketsLive CEO Chris Terry has a previous connection with Zeek Rewards which the SEC had to shut down for fraud in 2020.

• The VP Alex Morton has a long history with MLM companies like Vemma Nutrition that had to settle for hundreds of millions of dollars with the FTC for being a pyramid scheme. You should check out this revealing article on Morton that shows the reality of being a professional MLMer when he was with his last company.

• iMarketsLive is banned as unauthorized in Belgium, and also received warnings from other countries like France.

• When I first published this article, iMarketsLive had an F rating (very bad) from the Better Business Bureau due to having so many complaints.

Then all of sudden they had an BBB rating of “A”, mostly thanks to a bunch of positive reviews that showed up around the same time (many on the same day).

Coincidence? Yeah, right.

As another reviewer pointed out, prob’ly because IML asked their members to spam their BBB page with positive reviews to drown out the negative ones.

Nice try fellas. Not shady at all.

Also can’t forget that iMarketsLive is an MLM which means recruiting other members is highly encouraged.

Here’s one of IML’s top earners explaining in detail how it’s done:

Ask yourself: If it was just about forex trading, why teach people how to recruit at all? Why not just trade forex and make a ton of money?

I dunno… maybe cuz:

Most retail traders lose money in the long run, so the real money is made by getting other people to join.

Is it really, though?

  • 87% of all IBOs make an average of $4.30 per month (you read that right, less than $5/mo).
  • 98% of all IBOs make less than $115 per month.
  • Only 0.3% of all IBOs earn more than $30k per year.

Not exactly what I’d call a high-probability trade.

But if that doesn’t make you puke in your mouth a lil’, this industry might be for you.

If, however, you’re looking for a more legit and reputable business model… my two cents?

How Not To Lose All Your Money With A Managed Forex Account

Managed forex accounts present a decent opportunity for those who don’t have the time to learn how to trade forex or enough time to actually trade their own forex account to still make some profits from the forex market. They also open up investors to the triple threat of scam, incompetence, and bad brokers.

The first problem is that there are plenty of managed account scams out there. In some ways, these are much worse than forex broker scams or forex product scams. Managed account scammers usually try to get victims to invest as much money as possible, even their entire life savings. Sometimes they suggest taking out a mortgage on the victim’s house or securing other loans so that even more money can be invested. Falling for this kind of scam can ruin your entire life. As if this wasn’t bad enough, even a legitimate forex account manager can still wipe out your account through incompetence.

To avoid the most common managed account scams, you first must learn to differentiate between a normal managed forex account and a pooled account. In a normal managed forex account, the account is in your name, and the money goes from you to your forex broker. In a pooled account, you send your money to the account manager who is then supposed to pool the money from various clients into a trading account that the account manager controls.

Although there are legitimate pooled accounts under management, pooled accounts are MUCH more susceptible to fraud. Anyone with a computer can create fake account statements. With a pooled account, you can’t ever be sure where your money is. Many of these types of accounts guarantee a large monthly return on investment. There is no such thing as a true guaranteed high percentage return on investment in forex, and anyone offering one is 98% likely to be a fraud. The other 2% of the time, the person is merely an over-enthusiastic idiot. Either way, kiss your money goodbye.

But wait! You have a friend who invested and has been getting checks for the guaranteed 10% monthly return on their investment every month for over a year now. It must be legitimate.

I’m sorry, but what you’ve just described is almost guaranteed to be Ponzi scheme, named after the very infamous Charles Ponzi. It works like this:

The account manager gets one person to invest. The amount of money doesn’t matter. Returns of anywhere from a few percent per month to 20 or even 30% per month are guaranteed. Here’s the good part. NONE of the money is ever invested in the forex market. If the account manager promises 10% per month, the money can be hidden in a mattress and the payments maintained for 10 months. You might think this is a foolish way for the manager to make money, but it isn’t. He tells his first victim that by reinvesting half (or more) of that 10%, the account will grow faster. Next, he tells the first victim that if the total amount in the account is increased, the guaranteed percentage of return can also be increased. Of course, this deal is so great that many people will tell their friends and family about it. Some of these account managers will even offer incentives to customers who refer other customers. As long as more money from the existing clients as well as from new clients keeps coming in faster than money is paid out, the account manager doesn’t have to waste one second of his time risking money in forex trades. A well run Ponzi scheme can go on for several years, even while paying pretty good returns to investors. The problem is that the moment there’s any significant drop in new investment, the whole thing will collapse very quickly, that is if the scammers don’t decide to take the money and run even sooner.

Back to our example above where your friend was telling you all about those 10% monthly returns. Ask your friend if he or she has invested even more money since starting to take advantage of the high returns. Ask how many others have signed up based on your friend recommending this miraculous account manager. I’ll bet you a fist full of pips that your friend has not just been throwing more money in, but has also been recruiting others.

Even worse, sometimes, these Ponzi-style scammers don’t even bother to pay out money. Instead, they’ll try to get you to reinvest it all, or offer much higher rates of return with an automatic reinvestment plan. When the time comes to withdraw some of the money, there will have a be a pile of wildly varied excuses for delays in transferring funds, combined with more concerted efforts to try to lure the victims into putting even more money in with offers of better returns in the future. Of course, in this “Ponzi with no payout” scenario, the only ones getting any money are the scammers.

Within the United States, there is one very obvious warning sign of large-scale financial fraud of this sort. Using the US Mail for fraudulent purposes brings a whole lot of additional investigation and extra criminal charges. Sure, it’s nice of the company to use an expensive overnight courier service to deliver important documents, but every legitimate financial company I’ve ever dealt with in the USA sends at least some items by postal mail. If a company absolutely refuses to ever use the post office for even minor items, it almost inevitably means that they are trying to avoid a mail fraud charge.

Another GIANT red flag is if the managed account company only accepts some form of e-currency (excluding PayPal – they do try to investigate scam and fraud claims, many others don’t). Managed forex accounts often involve very large sums of money. You aren’t buying a product. You are loaning them YOUR money to invest. If a managed forex company refuses to accept a check or even a wire transfer, this means that you have no way to know what bank all of your money is going into, or even what country it’s going to. If you want to spend $200 on an EA, you don’t really need to know where someone’s bank is. If you are investing your life savings, you do.

Even if a pooled account does not offer guaranteed returns, it is still a risky investment. You are placing all of your money into the hands of an account manager. Even if the manager is legitimately trading forex and is very skilled, you are counting on this person to not make some kind of colossal mistake with your money. Considering the risks, I would never recommend investing in a pooled account without having an incredibly extraordinary amount of proof that the company is legitimate and the account manager is an amazing forex trader who always follows strict risk management rules. Even then, all it takes is for the good account manager to give into temptation, and all the money can disappear in a day.

OK, so if you’ve taken my advice and decided to avoid pooled accounts, does this mean your money is safe? Not quite.

A normal managed forex account keeps YOUR money in YOUR forex account with a forex broker. You will sign a Limited Power of Attorney (LPOA) granting the account manager the right to trade your account, and have a contract specifying how the account manager gets paid. You will be able to login and see exactly what trades are being placed and what your balance is in real time. This is good, but there are still some serious issues to consider. Do not just give your account number and password to someone or some company without having a contract and signing an LPOA. They might not be able to take money directly out of your account, but they can still send you on a one way trip to a margin call.

There are three ways your account manager can get money out of a normally managed forex account. The first two are obvious. The account manager (or account management company) may charge a flat fee every month and/or a commission based on the profits of the month, and these will generally be taken directly from your account as specified in your contract and LPOA. Either or both of these can be legitimate, and should be clearly disclosed in advance. The third way can turn even a good account management system into a ravenous beast that will eat away at your profits and maybe even your principal.

The third way that an account manager can get money out of your forex account works like this. Some account managers will only manage your account if you sign up through them with their preferred forex broker(s). This usually means that the account manager is also acting as an IB of that broker and getting a cut of the spread or commission charged by your forex brokerage for every trade made in your account (whether by you or by your account manager). The result is that more trades equals more profits for the account manager, whether you profit or not. Under these circumstances, a lot of account managers will make many more trades solely to gain these commissions on spread. In the stock market, this activity is called churning the account. There are some legitimate account management firms that do only trade accounts that they are IBs for, but you need to be aware that the temptation to churn your account will always be there in these cases. If you decide to go with such a forex account management company, discuss carefully with them about how many trades and how big of trades they will place in a typical month. The other drawback to this arrangement is that it restricts your ability to choose a forex broker that is good for any other forex trading needs you might have. It also means that you might get a good account manager, but be stuck with a poor forex brokerage that greatly reduces the profits that should be coming into your account.

Back to the monthly fee and commission on profits: Some companies charge only a monthly fee, others charge a percentage of your monthly profits, and others charge both. If the monthly fee is too high, it will eat all your profits (if there are profits). If the percentage of the monthly profits is too high, what’s the point of making any profit? Make sure that any percentage of monthly profit is based on the “high water mark” for your account. This means that if your account drops in value, the account manager doesn’t get a percentage of any new profits until all prior losses are made up and a new higher total amount of money in your account is reached.

What would reasonable fees be? That depends on your account, the skill of your account manager, and your investment objectives. If you have a $10,000 account and are charged $500 per month by your account manager, then that manager needs to average more than 5% gains per month or you will be losing money. On the other hand, if you had $50,000 in the account and still only paid $500 per month to have it managed, then the account only needs to exceed 1% average monthly return to keep gaining in value. For commissions on profits, I haven’t looked at too many managed forex companies, but have seen rates ranging from less than 25% to as over 50%. If the account manager can average significantly more than twice the returns you can get by yourself, then 50% might be reasonable. Otherwise, it’s too much. The calculations get more complicated if you get charged a monthly fee and a percent of profits.

For forex managers who charge a monthly fee, ask if the first month can be a free trial. Also, ask if they waive the fee if there are no profits for one or more months. You are paying them the fee to make profits, not to use your account to practice trading. Any legitimate trader will have occasional drawdowns, but there should be no reason to pay a fee if the drawdowns stretch over several months. Of course, you already know you should get any promises about fees in your LPOA and contract.

If the forex management company is in the US, ask if they are registered with the NFA and the CFTC. For the most part, this is a requirement, but there are a few loopholes to this rule. I would definitely suggest avoiding any US company that isn’t listed with the NFA and CFTC. Verify this by going to the NFA and CFTC websites to check that they are registered, do they have any complaints, and is the registration active or not. DO NOT trust the link from the managed account company’s website – it could be designed to take you to a faked version of the real websites. Wow! I was almost done editing this article and got a message from a friend about a managed account company that showed how safe it was because it was registered with the Securities and Exchange Commission. I had to look very closely at the certificate they displayed to see it was the SEC in the Philippines, not in New York.

For other countries, check the regulators closely. One of the most recent FPA Scam investigations was of a company that also listed a regulator’s website. That site was for a regulatory body that did not exist and only was there to appear to prove that the company was registered. Check the regulators website carefully. How many companies do they claim to regulate? If it’s only a few, that would make me suspicious that the regulator is fake Are there any signs of any enforcement actions against any company? If not, the regulator may be real, but lack any authority to do anything. Run a web search on the regulator and see how many links you get. Any real regulator should have quite a few, and some of them should be from websites belonging to the government in the country it’s based in.

So, you’ve avoided pooled accounts, found your own broker (possibly by using my method of broker selection), verified that the account manager or account management company is properly licensed and regulated, and has no major complaints filed with regulators. Do you feel safe? You are definitely safer, but you aren’t done yet.

Incompetence can erase your forex account balance just as quickly as fraud. Before signing that LPOA, make sure you understand the concept of risk management and discuss how the account manager will control risk. See if you can get a contract that specifies the maximum risk per trade along with the maximum total risk to be taken at any time. This should at least give you some legal leverage if your account is severely drawn down by improper risk management. Even then, login and check your account every few days, if not more often. Your excellent manager might go on vacation and the person who substitutes might not be nearly as good.

Of course, you should have already checked FPA’s Managed Forex Reviews and done a web search on the account management company and/or account manger that you will be dealing with. Remember that a lack of negative information on the web is NOT the same as an endorsement. The scam may be fairly new, so no one may have complained yet. Be wary if the website shows average returns going back years before the website was registered and ask questions about this. Of course, clever scammers may sit on a domain for an extended period or buy a domain that has been parked for years, just so their Whois records will seem properly aged.

When searching for information about the company on the web or in regulator websites, be careful if the names don’t quite match. A company called Perfect Acccounts, Inc may not or may not turn out to be the same company as Perfect Accounts, LLC or Perfect Accounts,Co. Legitimate forex companies often have similar names, and scammers will sometimes try to get a name that’s as close to a legitimate company name as possible in order to borrow some legitimacy.

Lately, I’ve come across some websites that provide comparison information about managed forex account companies. This looked a very useful service, until I checked one of them and found that all the forex account management services listed on the site offered referral fees. There may be some good comparison sites out there, but be aware that others are not there to do anything other that refer you to the company that pays them the highest fee for new client referrals.

If you want to invest your money in a managed forex account, be careful! Investigating before investing will take you a lot of time and effort. Then again, earning all of that money you want to invest also took you a lot of time and effort. Before you tell me that it’s too hard to check out a forex account manager or a forex management company, take a moment to imagine what you would do if your entire investment disappeared, either due to fraud or incompetence. Then come back and tell me if my suggestions are too much effort for you. If you are really thinking about putting your life savings into an account with someone based on them having a nice site on the internet or because your third cousin’s friend told you about them, either do the thorough investigation yourself or consider that it might be well worth hiring a professional investigator to check things out before placing hundreds of thousands of dollars under the partial or complete control of a stranger.

PLEASE do not ask me to recommend a forex account manager to you. I trade my own account and have never used one (but I might think about giving one a try in the future– if I see a solid track record with no hints of fraud). The reason I know enough to write this very basic article about this type of fraud is that I’ve traded stocks for many years before coming to the forex market. Additionally, my father used to be a stockbroker, and I got to overhear tales of investment fraud that were truly amazing (no, he wasn’t the criminal in those stories, or at least he never confessed it when I was listening). The types of fraud found in forex managed accounts are pretty much just repackaged versions of frauds found in the stock market and other trading markets. I also did some more digging around the web after writing about the forex account manager who got a nine year sentence for forex fraud and reading the FPA’s Scam Finding against the Forex Project of Luis Rivas to fill in a few more details about the subject.

Author Profile

Pharaoh

Pharaoh is one of the FPA’s oldest members (he claims to be about 4000 years old, but we think he’s exaggerating a little). He says he created the world’s first trading pair (Cow/Goat) while ruling ancient Egypt. Although there are no archeological or historical records to support this claim, we can’t find anything to disprove it. Although he’s not as active at the FPA as he used to be, he still holds the highest post count of all FPA members.

We don’t understand how he does it, but Pharaoh has an uncanny ability to spot scams faster than anyone else we’ve seen. He claims to have known a number of companies were HYIP scams just by their domain names and that each time an examination of the website proved him right. He’s also famous inside Forex Peace Army for warning about Ponzi schemes, even ones run by large and well established companies. He’s been in a number of threads trying to warn people away from active Ponzi schemes. In spite of the efforts of shills and those gullible enough to believe in free money to discredit his words, he keeps up the warnings. In each case, the company ended up either disappearing with all client money or being shut down by the authorities.

In addition to investigating scams, Pharaoh has written a number of articles on a wide rage of trading topics, including forex broker selection, risk management, and how to select a good account manager. He’s also covered other items of interest to traders, such as protecting wealth and purchasing precious metals.

Pharaoh claims to be a business consultant, but says he makes most of his income by running a globe-spanning hamster smuggling operation. If we are to believe him, he’s currently working on a network of hamster tunnels under southern Europe.

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